TREASURY RELEASES FINAL RULES FOR THE EMPLOYER MANDATE – INCLUDING ANOTHER DELAY

On Monday, February 10, 2014, the Treasury Department announced final regulations for implementing the Employer Mandate which included another delay. For employers with 100 or more employees, the regulations relax the 95% coverage rule, previously required beginning in 2015. Instead, these larger employers will only be required to extend health care coverage to at least 70% of their workforce to avoid the $2,000 per employee penalty in 2015. The 95% coverage requirement is now delayed until 2016.

Employers with 50-99 employees will be exempt until 2016 from the requirement to either offer coverage or be liable for a penalty. These employers will have to certify to the government that they haven’t fired workers to get under the threshold and qualify for the delay until 2016. They also must certify they won’t drop health plans they already offer.

In addition to relaxing the coverage requirements for 2015, the Treasury Department also provided clarifications regarding whether certain employee types and/or certain occupations are considered full-time. The final rules include the following definitions:

Volunteers: Hours contributed by bona fide volunteers for a government or tax-exempt entity, such as volunteer firefighters and emergency responders, will not cause them to be considered full-time employees.

Educational employees: Teachers and other educational employees will not be treated as part-time for the year simply because their school is closed or operating on a limited schedule during the summer.

Seasonal employees: Those in positions for which the customary annual employment is six months or less generally will not be considered full-time employees.

Student work-study programs: Service performed by students under federal or state-sponsored work-study programs will not be counted in determining whether they are full-time employees.

Adjunct faculty: The final regulations provide as a general rule that, until further guidance is issued, employers of adjunct faculty are to use a method of crediting hours of service for those employees that is reasonable in the circumstances and consistent with the employer responsibility provisions. However, to accommodate the need for predictability and ease of administration and consistent with the request for a “bright line” approach suggested in a number of the comments, the final regulations expressly allow crediting an adjunct faculty member with 2 ¼ hours of service per week for each hour of teaching or classroom time as a reasonable method for this purpose.

As with the 2014 proposed regulations, these final regulations continue to provide the safe harbors to determine affordability, the use of an optional look-back measurement method to make full-time status determinations and also extend the transition rules that applied under the proposed regulations, to 2015 under the final regulations, including:

Employers can determine whether they had at least 100 full-time or full-time equivalent employees in the previous year by reference to a period of at least six consecutive months, instead of a full year.

Employers with plan years that do not start on January 1 will be able to begin compliance with employer responsibility at the start of their plan years in 2015 rather than on January 1, 2015.

The policy that employers offer coverage to their full-time employees’ dependents will not apply in 2015 to employers that are taking steps to arrange for such coverage to begin in 2016.

On a one-time basis, in 2014 preparing for 2015, plans may use a measurement period of six months even with respect to a stability period – the time during which an employee with variable hours must be offered coverage – of up to 12 months.

These final regulations did not address the employer information reporting, required under the ACA, however the Treasury and the IRS noted that they will issue final regulations soon that aim to substantially simplify and streamline the reporting requirements.